- China Online Education has reached profitability over the last four quarters when China started with the lockdown.
- Covid was a catalyst for higher revenues rather than a one-time occurrence, as revenue kept growing in Q1/2021.
- The operating business model was severely pressured, starting one month ago. The Chinese government proposed regulation which will impact the EdTech sector.
- I believe the market is overreacting though. China Online Education is now trading cheaper than its cash and short-term investments. This provides a value opportunity.
- However, risks have to be taken seriously, as the competition in the market remains fierce and the uncertainty regarding governmental regulation is high.
For further details see:
China Online Education: Exaggerated Sell-Off Provides An Opportunity